By Angela Macdonald-Smith
Feb. 25 (Bloomberg) -- AGL Energy Ltd., Australia’s biggest power and gas retailer, expects to approve about A$1.1 billion ($716 million) of wind- and gas-fired generation this year for construction as it boosts investments in cleaner electricity.
The Sydney-based company is also still considering whether to exercise options worth more than A$1 billion to buy coal-seam gas and power assets from BG Group Plc, Managing Director Michael Fraser said today on a conference call about AGL’s first-half earnings. It will examine any energy assets sold by the New South Wales state, he said.
AGL made a gain of A$1.5 billion in the first half from the sale of assets, including Papua New Guinea petroleum interests, as it raises funds for investment in low-emissions generation and gas supply. The company reiterated a full-year forecast for profit before one-time items of between A$370 million and A$400 million.
“It’s been a very good and favorable story in the current market conditions,” said Parvathy Iyer, a credit analyst at Standard & Poor’s Ratings Services in Melbourne. “AGL is trying to retain its position of strength to bid” for the New South Wales power assets, she said.
AGL Energy dropped 16 cents, or 1.2 percent, to A$13.25 in Sydney trading, compared with a 1.4 percent slide in the Australian stock exchange’s benchmark utilities index.
Wind, Power
The Hallett 4 wind project may get the go-ahead “in the near future,” Fraser said. The Hallett 3 and Oaklands Hill wind ventures may be approved in the second half of the year, while the 360-megawatt Leafs Gully gas-fired generator in New South Wales should be sanctioned late this year or early 2010, he said.
The wind power projects, in South Australia and Victoria states, would cost about A$750 million, while the Leafs Gully project may cost between A$350 million and A$400 million, Fraser said in an interview. AGL’s options over the BG gas and power assets in Queensland expire on April 14.
AGL won’t delay planned investments waiting to see whether New South Wales goes ahead with a delayed privatization of power assets, Fraser said.
“If it was up for sale then we would be looking at how would we fund it versus these other projects,” he said. “It’s not up for sale today. It’s been a very long and drawn-out process and we’re not going to stop making sensible decisions.”
AGL surged to a profit of A$1.65 billion in the six months ended Dec. 31, from a year-earlier loss of A$22.9 million when it reported a slide in the value of hedging contracts. ‘Underlying” profit rose 5.3 percent to A$192.5 million, compared with a median estimate of A$200 million of four analysts surveyed by Bloomberg News.
‘Plenty of Options’
The results are “pretty much in line overall,” said Jason Mabee, a utilities analyst at ABN Amro Australia Pty in Sydney. “There were some higher costs in the retail business which were a little bit of a surprise, but nothing too big of a deal.”
Earnings before interest and tax in the retailing unit rose 8.1 percent in the half on higher winter gas sales and tariff increases, offset partly by rising operating costs as AGL switches to a new billing system. Profit at the energy trading business jumped 35 percent, while earnings at the gas and power unit fell 58 percent, mostly because of a drop in the contribution from Papua New Guinea, AGL said in a statement.
AGL has “plenty of options” for refinancing A$1.1 billion of debt that matures in October, said Chief Financial Officer Stephen Mikkelsen. It expects to arrange the refinancing by June for debt due both this year and next, he said in an interview.
The company in December paid A$370 million for a coal-seam gas exploration venture in New South Wales and bid A$171 million for Sydney Gas Ltd. The acquisitions make AGL “reasonably confident” it can meet its medium-term target of 2,000 petajoules of gas reserves without exercising the BG option, Fraser said.
AGL confirmed a forecast for full-year earnings before interest, tax, depreciation and amortization of between A$775 million and A$820 million. First-half sales advanced 5.1 percent to A$2.98 billion. AGL declared a first-half dividend of 26 cents, unchanged from a year earlier.
To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net
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